Economist, Telegraph Columnist, Broadcaster

Can Macron Revive The French Economy

“En Marche!” That’s the message of Emmanuel Macron – the telegenic “independent” inaugurated today as the youngest ever President of France. Can Macron get the moribund French economy “on the move” as his slogan suggests? Can this 39-year old, with only two years of political experience, no Parliamentary party and having never held elected office, succeed where so many have failed, injecting some dynamism into France? And can he re-invigorate the crisis-ridden European Union.

Much is at stake. The world’s sixth-biggest economy, France is also the second-largest member of the eurozone – a key player, economically and diplomatically, if the single currency is ever going to work. Having seen off Marine Le Pen, can Macron now drive jobs, growth and broader French prosperity, so keeping bad-tempered euro-populism in check?

For all the hype of last week’s victory, Macron faces an uphill struggle. For decades, French Presidents from Mitterand to Chirac to Sarkozy have won power on a wave of optimism, promising “fundamental reform”, before delivering economic disappointment. Since taking office in 2012, the out-going Francois Hollande has overseen average annual growth of just 0.7pc, compared to 1.3pc in Germany and 2.1pc in the UK and US.

Public disdain for centre-left and centre-right Presidencies explains why Macron – Hollande’s former economics minister – has set himself apart from “the establishment”. The extent to which the the French electorate believed him isn’t clear. While he beat Le Pen decisively, by 66pc to 34pc in the second round, there were record abstentions. For every five voters backing Macron, another four abstained or spoiled their ballot.

Despite his political inexperience, Macron must now tackle France’s deep-seated economic and social problems. Top of the list is unemployment of 10pc – twice that of the UK and Germany – with youth unemployment a heart-breaking 25pc. Payroll taxes of 40pc-plus and other huge regulatory obstacles to employment are compounded by a 33pc corporation tax rate. Macron clearly needs to reassert the linguistic origins of “entrepreneur”. That could prove tough, with French public spending accounting for a massive 57pc of GDP.

While easing an arthritic labor market, Macron has vowed to simplify pensions, slash regulations and tackle other vested interests curtailing growth. Tensions in deprived “banlieues” and homegrown Islamist radicalization must also be addressed. On the plus side, France has solid productivity and Macron starts with an economic “tailwind”. A leading business sentiment index just hit a six-year high, boosted by “En Marche” hype and a weaker euro. Corporate investment is also buoyant, up 4pc last year, with surveys indicating 5pc growth in 2017. And with the French budget deficit only slightly above the EU’s 3pc limit, Macron may feel there’s room for fiscal easing.

While in government, Macron tried pushing through various liberal economic reforms but was stymied by Parliamentary resistance and splits among the ruling Socialists. “I’ve seen inside the vacuum of our political system – and it’s blocked,” he said. Unblocking it means Macron’s nascent party – La République En Marche – prevailing in next month’s Parliamentary elections. Struggling to field a full list of 577 candidates, his staff have been rifling through thousands of applications from the public, having vowed half the candidates will be non-politicians and half will be women.

Whether a party under a year old can grab control of Parliament remains to be seen. Some polls suggest over 60pc of French voters don’t want Macron to control the legislature. Others forecast his party might anyway emerge as the biggest group, but with no majority. If the Republicans win, benefitting from five years of unpopular Socialist rule, Macron may yet be forced to appoint a conservative prime minister and government. Forget “blocked”, the French law-making machine would then risk wholesale gridlock.

Perhaps Macron’s biggest challenge lies abroad – and I don’t mean going head-to-head with Theresa May on Brexit. The older woman commanding the French President’s professional attention is far more likely to be Angela Merkel – provided the German Chancellor herself gains reelection this autumn. One issue is Germany’s trade surplus. Hitting new highs each month and now an enormous 9pc of GDP, this dangerous imbalance at the heart of the eurozone reflects, in part, how much the single currency is undervalued from a German perspective. Macron will want Berlin to encourage more domestic spending, not least on French exports.

The far bigger challenge, though, will be convincing Germany finally to allow the creation of a more integrated eurozone, with its own dedicated budget allowing for significant intra-region transfers. Without such a mechanism, the single currency – subject to periodic bond-market squalls and held together with printed money – will ultimately implode.

Berlin talks the talk on Europe. It has even stumped up tens of billions of euros to bail out various Mediterranean reprobates. But would the German electorate accept a unified eurozone finance ministry, explicit fiscal pooling and the backing of each others’ banking sectors – also known as Germany ultimately clearing up everyone else’s mess? I just can’t see it.

Those who think euro-populism is dead should consider that Le Pen attracted a vote share almost twice as big as her haul in the 2012 Presidential contest. Polls suggest almost three-fifths of Macron’s voters chose him primarily to block Le Pen – with only a fifth saying the former investment banker spoke to their concerns.

The challenge facing the 25th President since Napoleon is enormous, not least in terms of gaining public trust – as he distances himself from a European “establishment” desperate for him to succeed. If success means “completing the eurozone”, though, putting the single currency on a stable footing, even the talented Monsieur Macron is doomed to fail.